A Global Perspective on the European Crisis

Conference September 18-20, 2014
University Room, Hyde Hall
University of North Carolina at Chapel Hill

BACKGROUND

On November 7-9, 2013, at the University of Trento in Italy, a group of economists, political scientists, historians, sociologists, and public policy officials met to discuss “Economic and Political Crisis in Europe and the United States: Prospects for Policy Cooperation.” The focal points of this discussion were the divergent conditions in various EU countries, the inability of EU institutions to respond effectively to the crisis, and considerations of how to move forward, with special attention to Germany’s role as a reluctant but de facto leader in Europe. Some attention was paid to the larger global economic context in which the EU is operating and to the potential for coordinated efforts between the EU and the United States to improve the relative positions of each. In particular, there was disagreement about whether the possible trade agreement (TTIP) between the EU and the US could make an appreciable difference going forward. Primarily, however, the focus of the discussion was on issues internal to Europe. The proceedings for this first conference are currently being assembled into a book.

PURPOSE OF THE CHAPEL HILL CONFERENCE

We would now like to turn our attention to a more global perspective on the European crisis and consider critically two fundamental questions. First: did the true meaning of European integration change following the crisis? European integration was driven by two fundamental goals: to overcome the long-standing animosities, particularly between Germany and France, and to enable European economic prosperity, first to overcome the devastation of World War II, subsequently to maintain prosperity in the new globalized economy post-1970. For almost sixty years (1950—2008), the process of integration created a win-win situation that put in motion successful cooperative collective action, thus easing or solving problems that previously appeared intractable. National goals, which had underwritten the continent’s tragic history from 1914 to 1945, were drastically revised as governments agreed to renounce important parts of their sovereignty in favor of supranational institutions. A major accomplishment was the creation of a single currency for many, although not all, of the member nations in the European Union. The euro was seen for years as the best device for creating an irreversible push to further political integration, even as it provided immediate economic advantages. For this reason, the economic crisis of 2008 inevitably became a political crisis. Is the EU model, which has so successfully brought peace to Europe, sustainable? To what extent can national sovereignty be yielded to supranational agreements and institutions? Or are we doomed to the supremacy of the nation-state?
The second question concerns the viability of a European economic model vis a vis the United States and the emerging economies (the so-called BRICS). In the press in the United States but also in publications such as The Economist this is often framed as Social Europe vs. (neo) Liberal America. In truth, the European economic and welfare state models are highly diverse. The high wage, high skill economies of Northern Europe (Germany, Switzerland, Austria, Benelux, and the Nordic countries) have always been very competitive in export markets while the Southern European countries and the UK, along with the United States, have generally run trade deficits. On the other hand, most of the continental European countries have a poor record in producing employment compared to the US, the Nordic countries, the Netherlands, and Switzerland. In terms of economic growth from the mid-1990s up to the Great Recession, we again find heterogeneity, with Iberia, Ireland, Greece, the United Kingdom, and the United States performing very well due (we know in retrospect) to unsustainable housing and real estate booms. The Nordic countries also performed well due to a (sustainable) ICT led boom, while the rest of the European countries, including Germany, languished. By contrast, during the Great Recession, the German economy was a bright spot in relative terms with the economy growing at 0.9% per capita per annum. Austria, Sweden, and Switzerland also registered positive growth rates. Though the US economy shrank by 0.7% per annum, this was better that most of the remaining European countries, particularly the crisis countries of the European periphery.
The crisis seems to reveal the flaws of the integration process and the integration architecture, while raising the question of the feasibility of the Euro. Indeed, the heterogeneity of the European economies outlined in the previous paragraph is one of the key sources of the weakness in the design of the Euro. The crisis, moreover, has generated multiple and contradictory actions within the EU. There has been an increase of unilateral, uncooperative moves made by national states. But there has also been the reaffirmation of certain EU powers and structures. Thus, it remains entirely possible that the crisis will in the end strengthen the integration process. But the present situation could be the first stage of a disruptive process, fed with growing inter-European distrust, that dooms the EU, or at least the eurozone as it is presently constituted. Can Europe fix the problems simply by completing its institutional architecture and strengthening political will? Or should the European integration be re-established on sounder bases, such as creating political integration to make a common currency, or other forms of economic integration, workable? Or is the eurozone facing an inevitable break-up and reconfiguration and only likely to produce further strains on inter-European relations? Perhaps most important to the rest of the world, can other countries and international organizations do anything to foster and support a positive outcome of the present European difficulties? And if so, what can they do?
How participants answer those questions necessarily influences their understanding of what Europe should be doing and what the future prospects are for the euro-zone and the European Union. Thus, whereas our Trento conference mostly gathered experts on Europe, we aim to bring to Chapel Hill experts on international trade and relations in order to consider policies adopted toward Europe by non-European nations. And we will put these experts into dialogue with people more focused on Europe itself. What are the prospects for European recovery and progress (both economic and political) if we take into consideration how other nations are positioning themselves in relation to Europe? What role will the IMF and other international organizations play in shaping Europe’s future? What can Europe do internally—or by way of international agreements—to better its position? As in our first conference, we want to attend to all factors—economic, historical, political, diplomatic, and institutional—that impact Europe’s ability to act effectively and to control its destiny. To that end, we will once again invite a wide array of scholars and policy makers, especially taking advantage of Chapel Hill’s proximity to Washington DC.

SPECIFIC TOPICS ADDRESSED

Is Europe experiencing a steady and irreversible economic decline? What are the reasons of the present difficulties: are they to be found in the present institutional architecture of the European Union and of European countries (such as high public debts, rigid labor markets, excessively small enterprises, costly welfare, bureaucracy)? Or are they mainly the consequence of the stabilization policies implemented to fight the crisis? Is Europe able to compete in a globalized economy, or do structural issues and/or hardened institutional forms render it incapable of recovering its former prosperity? In short, what is the proper diagnosis of Europe’s current economic woes. Any suggestions for ways to move forward will greatly depend on the understanding of what is the problem in the first place.

European countries feature a variety of economic, political systems and the European Union itself corresponds mostly to the German idea of the social market economy. Until the crisis the European Union was characterized by state mediation of the relation between capital and labor, fairly robust regulation of markets, and state provision (or guarantee) of social goods (basic welfare needs, education, health care, transportation, pensions). It is increasingly clear that the continental version of the social market economy with its low levels employment, heavy protection of labor market insiders, and low fertility (and thus rapidly aging population) is not viable. These political economies, which constitute most of the European Union, can move toward the social democratic model of the Nordic countries or the liberal model of the United Kingdom or some hybrid of the two. If Europe must transition to a new political economy, what political forms, forces, and conflicts might emerge during the transition? The strains on social relations engendered by the global economy are not unique to Europe, even as alternatives to the European model exist around the world. What are the possible futures—good or bad—for Europe’s political arrangements? Should Europe simply revise and release the stringent budget constraints foreseen in the Maastricht criteria and the Stability and Growth Pact? Or does the fundamental problem rest in the outdated and inefficient international specialization of European economies?

The United States is simultaneously pursuing regional trade agreements in Europe and in Asia. What are the prospects for successful negotiations? What kind of difference, if any, would established agreements make? What should Europe be looking to secure in the TTIP talks? Could the TTIP be a stabilizing factor for Europe?

Europe, of course, is considered Europe (one entity instead of a geographic site encompassing multiple nations like Asia) because it has created a set of supra-national institutions, both political and economic. The euro crisis has brought the whole project of a unified Europe into question and has opened the ground to potential conflicts of interest between the Union and the national states and among different countries. The left views Europe as afflicted with a “democracy deficit” that establishes the rule of unaccountable technocrats. The right sees Europe as a threat to national sovereignty and identity. Yet the global economy is already (for all of its participants) a field in which international organizations play a significant role. What are the best ways to think about—and to imagine a way forward—for the institutions of the EU, and about the relation of the EU (or of separate European nations) to non-EU international organizations? The instability of current arrangements seems obvious, which suggests that changes are inevitable. But the direction such changes might—or should—take is far from clear. While everybody agrees that deep and far-reaching reforms are needed at both union and national levels, it is unclear how these reforms could be made mutually acceptable to the different nations involved.

What kind of influence—for better or for worse—can international organizations have on Europe’s future? Should we consider primarily a role of support (mostly financial) or a policy role (e.g. in the form of criticism of European financial policies, or priority to be given to fighting unemployment)? Of particular interest on this topic are the International Monetary Fund, the OECD, and the International Labor Organization. But other bodies—such as the WTO and the UNDP—could also play a significant role in Europe’s attempts to emerge from the crisis.

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Our goal is to invite participants who can speak to this range of issues, always with an eye on positioning discussion of Europe’s economic and political situation in the context of relations to non-European nations and to international organizations.

CONFERENCE FORMAT

The conference is organized into two keynote speeches, five panels (on the topics listed above), and a concluding round-table discussion. Overall, we plan to have 12 speakers (two for each panel, and the two keynote speakers), plus five discussants (one for each panel). We will also need to have five chairs for the sessions, plus two chairs for the keynote sessions, and one for the closing roundtable.

The first keynote presentation will consider Europe’s problems in the light of collective action theory. The second will discuss whether Europe is becoming an economically and politically destabilizing factor.

The conference is free and open to the public but pre-registration is required. To register, please send a note to Stephanie Volk stating the days you will be in attendance. To request a password to view the working papers, please contact John Stephens, director of CES at UNC.

Acknowledgement of support: This conference is co-organized and co-financed by the Research Unit on Local Development and Global Dynamics (Department of Sociology and Social Research) at the University of Trento and the Center for European Studies and the Institute for the Arts and Humanities at the University of North Carolina at Chapel Hill, with the generous support of the European Union, UNC Global, UNC's College of Arts and Sciences, and UNC's Curriculum in Global Studies.